What is the total credit Sales of Moksha International

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Reference no: EM132850611

Question - Moksha International has a total sale of Rs.100 lacs, of which 75% is on credit. The average collection period is 80 days. The past experience indicates that bad debt losses are around 1.5% of the credit sales. The firm spends about Rs.1,50,000 per annum to administer its credit sales. These are avoidable as a pay advance against receivables to the firm at an interest rate of 18% after withholding 10% as reserve. (Assume 360 day year)

Required -

1. What is the total credit Sales of Moksha International?

a) Rs. 80 lacs

b) Rs. 75 lacs

c) Rs. 70 lacs

d) Rs. 65 lacs

2. What are the Average Receivables?

a) Rs. 80,00,000

b) Rs. 22,22.222

c) Rs. 16,66,667

d) Rs. 13,89,990

3. What is the disbursable amount to the firm by the factor?

a) Rs. 16,66,667

b) Rs. 14,58,333

c) Rs. 16,58,999

d) Rs. 18,92,992

4. What is the Total Interest Chargeable by the factor?

a) Rs. 58,333

b) Rs. 41,667

c) Rs. 1,66,667

d) Rs. 83,192

5. What is the Effective Cost of Factoring?

a) 4.23%

b) 3.51%

c) 6.54%

d) 2.86%

Reference no: EM132850611

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